Sunday, December 11, 2011

Money is not real.

by Pax Village Voice on Sunday, December 11, 2011 at 10:30am
A farmer offered a laborer a measure of wheat in return for a day of labor.  That was called Barter.  But the Labor already had enough measures of wheat for the year ahead.  He wanted a smoked ham.  The wheat Famer had no ham he wanted to part with.  But he knew that the pig farmer did and the pig farmer wanted to trade ham for wheat. 

But the laborer did not want to carry a measure of wheat all the way out to the Pig farmer and the Wheat farmer did not want to either.  So he gave the laborer a Note  that said  "IOU one measure of wheat" written on a piece of of paper and signed by the wheat farmer.  The IOU was a debt that the bearer could use to buy wheat.

The pig farmer who traded his ham did not actually have to go get the wheat himself. He might decide to give it to someone else to get something he need more than wheat and that person could use the Debt Note to get wheat. The Debt Note could just keep being passed from hand to hand until someone need it to pay for wheat.   When the Wheat Farmer got it back for the measure of wheat the debt was settled.  

In the mean time the passing of the Debt Note from hand to hand caused a lot of things to happen. That was how money was born.  Debt has equaled Money ever since and Debt  Money has made the world commerce go round and round ever since.  Today's money has the value of a "Measure of Money". because it is the only Debt Note that can be used to pay the Taxes that Government charge to citizens in order to pay for Government Service.

The point I am interested in making is that money has no physical limit. If a debt is created [with or without interest], money is created. When the debt is retired by taxes, the money no longer exist.  Money is a function of a transaction and does not exist independent of that transaction. Its existence is not and cannot have an absolute value. The value is relevant to the supply and demand on the Good or Service the possessor of the Debt Note wishes to acquire. and the total amount of the Demand units in use.

Money is like points in a ball game. The points are exactly enough to to score a game. If more are needed at any time in the game, they will be brought into existence by creating the appropriate debt. In the world of commerce money that already exist from previous debt can be transferred from one participant to another or new debt will be created to make new money. The failure to create new money as needed or retire old money when not needed will result in deflation or inflation [Boom & Bust cycle}.

 If a Community Institution [ preferable Government ] is not creating new debt money as need or destroying old Debt money when it is not needed. The result will be an unstable economy. If the power to do that is in the hands of International Bankers and not Government the power will be used to serve Greed and  NOT the General Good of the People.  That is Democracy's greatest Enemy.

Let Money come forth when needed and it will be Good.

I first wrote this essay for my Facebook community page Pax Village Voice. 

William Hodge  

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